Mitsubishi officially ceases production

President and CEO of Mitsubishi Motors Australia Limited (MMAL), Rob McEniry, confirmed today that the company will close its production lines at the company's plant at Tonsley Park in South Australia.

Though the company will continue to operate in Australia, it will be as a full line importer.

"Notwithstanding the plans for closure, Mitsubishi's future in Australia remains very strong, with continuing overall growth prospects. Australia is a very important market for us and we will continue with our full and expanding range of imported vehicles, as a significant and major player in the Australian market", said McEniry.

McEniry described the decision as "heart breaking" and "heart wrenching" but that stated that MMAL's cumulative losses of over $1.5b "could not continue forever."

He stated Mitsubishi had exhausted all avenues in efforts to keep the facility viable, but said the decision to close the facility was the "only commercial responsible action".

Around 930 jobs will be lost at the plant, located in Adelaide's southern suburbs.

Several reasons were cited for the company's decision to put the locally manufactured 380 large car to rest.

Large car sales during 2005 and 2006 have declined by 37 per cent and are a far cry from the segment's figures in 2001, when the Mitsubishi 380 was signed off for production.

In addition, potential export markets for the car have dried up as the value of the Australian dollar has increased.

McEniry gave as one example the proposed long-wheelbase version of the 380, which was considered for export to the US market. At the time the project was initially approved, the Australian dollar was worth US$0.58 and projected per car revenues would have been approx $41,000 per unit. With the dollar now close to or above US$0.90, the revenue would have been $20,000 or less -- what McEniry described as "highly unprofitable now".

Other opportunities that looked superficially promising did not stack up either, the MMAL boss stated. Among those scenarios explored were diesel and four-cylinder -engined variants of the 380, swapping production to SUV or small cars and adding a second car line to the plant.

McEniry outlined MMAL's accumulated losses over the last ten years at $1.5b -- losses he stressed that were fully funded by MMAL's parent, Mitsubishi Motor Corporation (MMC). With growing sales of its imported models, McEniry expects the Australian arm to return to profit fairly quickly, however.

MMAL's financial year commences April 1 (to align with the Japanese fiscal calendar) and -- other than the one-off payments related to the plant closure, such as redundancies -- the company will be profitable, based on the sales of imports alone, McEniry says.

"Our priority now shifts to the welfare of the employees, other business partners and customers", McEniry said.

"We will honour the same agreement as for the Londsale employees", he said, referencing MMAL's closure of its engine plant and explaining that the company would offer "favourable separation packages".

All the employees affected by the announcement were allowed to leave work immediately after today's announcement and will have the rest of the week to consider their options.

MMAL will provide the employees with "a full range of support services" to find employment elsewhere.

As far as suppliers are concerned, McEniry advised that the 380 accounted for just two per cent of total vehicle sales in Australia and virtually no OE parts suppliers are entirely dependent on Mitsubishi's local production

He says the cessation of production will have "little or no effect" on the suppliers.

McEniry offered both state and federal governments his thanks for their support and emphasised that the decision to cease local manufacturer was not a reflection of any concern Mitsubishi might harbour over government policies.

He also strenuously denied the "chronic misconception" that MMAL's local manufacturing had only continued via heavy government subsidy.

Other than the standard government assistance through ACIS, the only other government support had been $35 million from the SA government for the development of the 380 -- money which McEniry says Mitsubishi will repay.

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